ITEP Matt Gardner Response Transcript (4/18)
Erin Gretzinger (EG): Great. Perfect. Yeah. So I guess like, Do you have any questions for me
about the claim or process and how we write the briefs before I ask you some specific things?
Matt Gardner (MG): No, I mean, it's really, the only interesting thing… I saw the quote, assuming
we're thinking of the same thing: it's the 95% of businesses seeing a "huge tax hike" or
something to that effect.
EG: Yeah, yep. That's the claim that we're checking.
MG: The only interesting question to me is like, exactly what he was referring to whether it was
the pass through deduction in particular, which I know is near and dear to his heart, or the 2017
tax cuts more generally. I mean, I think, you know, my responses are going to be kind of the
same, whichever one, it is. Just curious whether you had any insights on that?
EG: Yeah. Yeah. So I was curious about that, too. So I actually reached out to his office. And
their response was specifically you know, that 95% of businesses in America are pass-through
businesses. And they said that, you know, many of the provisions in the Tax Cut and Jobs Act
were going to expire at the end of 2025. So they sounded like they were referring to, you know,
the reductions in general in individual income taxes, but also, they did say that, you know, the
pass-through deduction would also expire. So actually, it sounds like both, directly from his
office, that he was referencing both the individual income tax side of things, as well as the pass
through deduction.
MG: Got it. Okay. So I guess the first thing I would say about this is that it's a very difficult thing
to validate either way, because of sort of an apples and oranges thing with the data we have
access to. Pass through businesses, as you know, pass through businesses, you know, they're,
they're entities that don't pay taxes on their own, really, they pass through tax expense to their
individual owners. And so I mean, whether they're profitable or not, is like an entity level thing.
And once they decide whether they're going to have income, then that income has to pass
through the owners. But all we really see, in general, if you know, people like us who are trying
to figure out well, how universally does this thing affect people is the way it manifests on
individual tax returns. So for example, we know that in 2020, which is the most recent year, you
can get data for the past three deductions. We know how many dual tax returns had this
deduction. And we know how much they claimed it for what we don't get to see is, you know, but
we can't match that up with the business system. So I sort of put a, to say it pretty precisely, the
data you can get from the IRS tell us that in 2020, there were 22.8 million individual tax returns
that have a qualified business income deduction on it. This is the pass through deduction that
Senator Johnston is a fan of. And we know that there were what 35 million businesses I think,
an operation in that year, so but those two bits of information, you can't hold them up against
each other and say, 'Aha,' because it could be that, like one return had income from two
businesses, right, you could totally be that the 22 million procurements represented every last
one of these businesses, but we just can't know. But what you can know, from the aggregate